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February 27, 2019 - By Antoni Casalinuovo

Has The Court Lowered The Threshold For Approving By-laws?

Recently, we acted for a court-appointed Administrator and sought direction from the Superior Court of Justice as to whether a Borrowing By-law was validly passed at a meeting of owners. The Administrator asked the Court for judicial direction in light of the lack of clarity that arose from the recent amendments to the Condominium Act, 1998.

The facts in this case may have compelled the Court’s decision: The condominium corporation held a meeting of its owners where 53% of all unit owners were present in person or by proxy. At that meeting, approximately 75% of unit owners in attendance voted in favour of approving the Borrowing By-law. From a mathematical standpoint, this translated to approximately 40% of all units of the condominium voting in favour of the By-law.

Due to the unique factual circumstances of this condominium corporation, its Administrator sought the Court’s opinion in interpreting the recent amendments to Section 56(10) of the Condominium Act, 1998. The question posed to the Court was:

What is the requisite standard to pass a By-law? Specifically, whether Section 56(10) of the Act, as amended, requires the “majority” threshold to relate to (a) the 25% quorum requirement, or (b) the voting requirement to approve the By-law?

When reading sections of the Condominium Act, 1998, all applicable sections must be considered. Two key sections to consider are: Section 50(1), which provides that a quorum for the transaction of business is 25%, unless otherwise prescribed; and Section 53, which stipulates that only a majority of the votes cast at the meeting of owners is required to approve a question proposed to the owners at the meeting – not a majority of all the units of the condominium.

When the Administrator went to Court, the Judge was presented with the wording of Section 56(10) pre-amendment compared to its wording post-amendment. The Judge agreed that the introduction by the Ontario Legislature of the phrase “or such other number of ownersthat is prescribed” after “the owners of a majority of the units in the corporation” created ambiguity in the legislation’s intention; especially since there is nothing prescribed in the Regulations addressing this specific issue for a Borrowing By-law.[i] Thus, the Judge found that the requirements of Section 50(1) [quorum is 25%] and Section 53 [majority of votes cast at the meeting] were not altered by Section 56(10) [approving a By-law].

The Judge was also made aware that other provisions of the Condominium Act, 1998 contained different wording relating to the required thresholds for unit owner votes.

For comparison, here are some of the other places in the Condominium Act, 1998 that speak to voting thresholds, in comparison to Section 56(10) of the current Act:

Section

Issue to be Voted on

Voting Threshold

s. 33(1)

Removal of Director

“where the owners of more than 50 per cent of all of the units of the corporation vote in favour of the removal”

s. 97(4)

Approval of substantial change to common elements

“the owners who own at least 66 2/3 per cent of the units of the corporation vote in favour of approving it”

s. 107(2)(d)

Approval of Declaration Amendment

“the owners of at least 90 per cent of the units at the time the board approved the proposed amendment have consented to it in writing”

s. 107(2)(e)

Approval of Declaration Amendment

“the owners of at least 80 per cent of the units at the time the board approved the proposed amendment have consented to it in writing”

s. 56(10)

Approving a By-law

“the owners of a majority of the units in the corporation, or such other number of owners that is prescribed, vote in favour of confirming it”

If the Ontario Legislature had intended for a By-law to be enacted only if a majority of all the units of the condominium – and not just a majority of the units in attendance at the meeting to vote on the By-law – then the Legislature should have worded Section 56(10) to be identical to Section 33(1) regarding the removal of a sitting director on the Board, which has a clearer voting threshold. For example, Section 56(10)(a) could have been worded:

“… the owners who own a majority of all of the units of the corporation, or such other number of owners that is prescribed, vote in favour of confirming it …”

The Court was able to see the difference in the drafting between the various provisions, and confirmed that the current wording of Section 56(10) did not, on its face, clearly amend the default voting requirements in Section 53 of the Condominium Act, 1998. When reading sections in the Act, all applicable sections must be considered. Section 53 stipulates that only a majority of the votes cast at the meeting of owners is required to approve a question proposed to the owners at the meeting – not a majority of all the units of the condominium.

Ultimately, the Court reaffirmed that the Condominium Act, 1998 is remedial legislation and should be given a broad and liberal interpretation, to support a condominium corporation’s ability to pass by-laws and conduct necessary business.

Shaking Up the Status Quo

The Court’s interpretation has now shaken up the status quo in the condominium industry, by highlighting the inconsistencies in the drafting of the legislation. Past practice for condominium corporations dictated that the owners who own a majority of all of the units of the condominium needed to vote in favour of approving a By-law. But this case highlights the ambiguities in the drafting of the recent amendments to the Condominium Act, 1998.

The problem that the industry now faces is that the Court has acknowledged that there is an ambiguity in regards to the passage of a By-law, and the most recent amendments did not assist in clarifying the ambiguity either.

Applying the facts of this case, it may now be possible for a condominium to pass a By-law wherein a majority of all unit owners of the Corporation are in attendance and a majority of those owners present (in person or by proxy) have voted in favour of approving the By-law.

However, it may also now be possible for a condominium, given the open-ended wording of the Court’s ruling in this case, to pass a By-law wherein a 25% quorum of all unit owners of the Corporation are in attendance and a majority of votes cast were in favour of approving the By-law.

Given the added uncertainty and “grey area” injected into the law by the Court in this case, we strongly recommend that any condominium corporations, which are considering enacting a By-law should consult with its legal counsel first, regarding what the potential voting threshold may be for getting such a By-law enacted.

How do we fix this ambiguity in Section 56(10)? Ideally, under the last round of amendments, the Legislative drafters should have tried to fix the inconsistent language in the Condominium Act, 1998, so that all voting thresholds were clearly calculable. However, to get this back in front of the Ontario Legislature for another round of amendments is unrealistic, given the recency of the last amendments to the statute. Thus, a revised General Regulation by the Minister of Government and Consumer Services, clarifying the prescribed voting thresholds for By-laws, would be the best way forward – so that Boards and Unit Owners understand what it takes to get a Borrowing By-law passed in the future.[ii]

[i] None of the 4 types of By-laws listed under Section 14(2) of the General Regulation include a Borrowing By-law.

[i] The Minister of Government and Consumer Services could, if the government wished to clarify that the voting threshold for a By-law is the owners who own a majority of all of the units of the Corporation, amend the General Regulation by adding a Section 14(3) stipulating: “(3) For a by-law that is not described in subsection 14(2) of this Regulation, the other number of owners that is prescribed for the purpose of clause 56 (10) (a) of the Act is the owners of more than 50 per cent of all of the units of the corporation.”

All of the information contained in this article is of a general nature for informational purposes only, and is not intended to represent the definitive opinion of the firm of Elia Associates on any particular matter. Although every effort is made to ensure that the information contained in this newsletter is accurate and up-to-date, the reader should not act upon it without obtaining appropriate professional advice and assistance.